More COVID Funding and More Untaxed Income

More pandemic aid? House Majority Leader Steny Hoyer told reporters the Biden administration plans to ask for “substantial” federal funding for testing, vaccines, and schools to address the continuing pandemic. House Appropriations Chair Rosa DeLauro said “We’ll take a look at that and see how that fits with an omnibus” fiscal 2022 spending bill.

A new way to think about incomes from non-corporate businesses. In a new analysis, TPC’s Bill Gale and Brookings Institution colleagues Swati Joshi, Christopher Pulliam, and John Sabelhaus find that over the past 30 years, the US went from taxing about half of non-corporate business income to less than a third. They argue that IRS data under-report business income that already has been reduced by tax rules, avoidance strategies, and non-compliance. They suggest policymakers work from economic income reported by the National Income and Product Accounts (NIPA) and Financial Accounts of the United States: “It might be especially useful as Congress debates how best to tax very high-income households.”

Speaking of untaxed income… The Wall Street Journal reports (paywall) that New York State business owners are saving billions of dollars in taxes thanks to a state workaround for the federal $10,000 cap on state and local tax (SALT) deductions. These business owners paid the state $11 billion in pass-through entity taxes through 2021, which allowed them to shift their state income taxes from individual tax returns to business filings. The SALT cap doesn’t apply to business filings. 

And reducing withholding… In Wisconsin, Gov. Tony Evers ordered the Department of Revenue to revise withholding tables, which have not been revised since 2014. Evers said the changes mean single filers who make $50,000 will see $551 more in their paychecks and  married couples who each earn $50,000 will take home $1,200 more. Simply changing withholding tables won’t reduce the total amount of tax a worker owes, however.

Polish tax cuts too. Prime Minister Mateusz Morawiecki announced a second round of sales tax cuts. His government is trying to address the impact of inflation, which reached a 21-year high last month. From February through July, Poland will cut its tax on engine fuels from 23 percent to 8 percent and repeal the 5 percent sales tax on some foods.  

For the latest tax news, subscribe to the Tax Policy Center’s Daily Deduction. Sign up here to have it delivered to your inbox weekdays at 8:00 am (Mondays only when Congress is in recess). We welcome tips on new research or other news. Email Renu Zaretsky at [email protected].